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CA Final · Financial Reporting · Ind AS 23 Borrowing Costs

Ananya Textiles Ltd borrowed Rs 10 crore at 9% p.a. specifically to construct a new weaving plant, which is a qualifying asset. During the year, interest actually incurred on this loan was Rs 90 lakh. Pending utilisation, part of the loan was temporarily invested and earned Rs 12 lakh. How much borrowing cost is eligible for capitalisation for the year under Ind AS 23?

Rs 78 lakh is capitalised. For a specific borrowing, Ind AS 23 allows the actual interest incurred during the period less any income earned on temporary investment of the unspent funds. So Rs 90 lakh minus Rs 12 lakh gives Rs 78 lakh.

  1. ARs 90 lakh
  2. BRs 78 lakhCorrect
  3. CRs 102 lakh
  4. DRs 12 lakh

Explanation

For specific borrowings, eligible cost is actual borrowing cost incurred less investment income on temporary investment of those borrowings. Rs 90 lakh - Rs 12 lakh = Rs 78 lakh. Rs 90 lakh ignores the deduction of investment income; Rs 102 lakh wrongly adds it.

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